How to Choose Your Tax Advisor

If there is ever a hot topic this time of year, it is “who prepares your taxes and what do you pay?” How you answer that question depends on what you look for in a tax advisor.

There are two directions to go in. If you just want your tax returns prepared, you could use just about anybody who puts out a shingle. If you are looking for more than that, then you may want to build a relationship with a tax professional who can provide you trusted advice year-round for years to come.

There are two groups of tax advisors to choose from – those with professional credentials and those without. You might choose a local tax preparer who has been performing a full or part-time tax service for many years and is more than adequate for you.

You could choose one of the national tax franchises. These part-time folks enter your data by going through a question and answer program — similar to what is offered by TurboTax software. There is no personal professional judgment offered here and they are generally available just a few months of the year.

Then there’s EAs, CPAs and Tax Attorneys who can represent you before the Internal Revenue Service. An EA is an Enrolled Agent, a person who has taken and passed a comprehensive IRS exam or has been employed by the IRS for five years.

A CPA is a Certified Public Accountant licensed by the state in which they practice. CPAs have completed a Bachelor’s degree and likely a Master’s degree in accounting and tax, have passed a state multi-day exam on accounting principles, tax law and its applications, and completed an experience requirement with an established CPA firm. CPAs provide a broad-based approach to your tax and accounting circumstances.

A CPA or an EA is a good choice for most people seeking professional advice. In the rare case you would ever need one, a tax attorney generally focuses on very complicated tax situations and tax court cases.

What about cost? This will vary with the complexity and length of time it takes to prepare your return. You can ask upfront, but even the tax franchises won’t give you a final price until the tax return is completed. Often the credentialed tax preparers are around the same price or even less expensive. It comes down to what you value – the commodity of tax preparation or the relationship with a trusted advisor who prepares your taxes.

Are you looking for a tax preparer? Ask for a referral and meet with the prospective tax advisor. Do you feel comfortable with them and their approach? It’s okay to gauge their fee, but don’t make price your first criteria. It costs a lot to be in business and to maintain professional credentials. Those that offer tax preparation at very low prices likely won’t be around for long.